Elena's Café is investing in a new commercial refrigeration unit that will cost $40,000. They estimate that the unit will produce annual revenues of $12,000 for each of the next 6 years. The refrigeration unit will have negligible salvage value at the end of the next 6 years. Assuming a tax rate of 24%, a MACRS 5-year property class, 50% bonus depreciation, and an after-tax MARR of 8%, compute the present worth of the refrigeration unit and determine whether or not Elena's Café should invest in the refrigeration unit.
Elena's Café is investing in a new commercial refrigeration unit that will cost $40,000. They estimate that the unit will produce annual revenues of $12,000 for each of the next 6 years. The refrigeration unit will have negligible salvage value at the end of the next 6 years. Assuming a tax rate of 24%, a MACRS 5-year property class, 50% bonus depreciation, and an after-tax MARR of 8%, compute the present worth of the refrigeration unit and determine whether or not Elena's Café should invest in the refrigeration unit.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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